Citigroup expects relative outperformance in the card and payments sector although headwinds are forming, said the company’s analysts in a research report released Monday.
Analysts raised target prices on three companies in the report: American Express to $60.00 from $58.00, MasterCard to $375.00 from $360.00 and Visa to $104.00 from $92.00.
The company sees positive themes in the sector including early signs of card loan growth, improving U.S. economic data, receding regulation risk and moderating capital returns, the report said.
But analysts are concerned about moderating global spending from its third-quarter peak, including in emerging markets and Europe, a heightened competitive landscape for issuers and an expense drag from alternative payments.
Citigroup analysts prefer Western Union and VeriFone Systems among processors and “continue to have conviction in Buy-rated American Express.”
“The next phase of this multi-year card sector recovery should be loan growth, but this will require lower unemployment and better consumer confidence,” the report forecasted.
Citigroup also added Capital One to its “Top Picks Live” list and called it the most mispriced stock in its coverage universe. Analysts “believe Capital One is well positioned with an overweight position in cards, which is one of the best performing businesses for banks today.”
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Citi Investment Research and Analysis is a division of Citigroup Global Markets, which does and seeks to do business with companies covered in its research reports.
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